DSU UPDATE: ANTIDUMPING, US-ANTIGUA/BARBUDA GAMBLING, INDIA-US TEXTILES
US granted 11 months to implement ‘Byrd Amendment’ decision
On 27 June, a WTO arbitrator gave the US time until 27 December this year to implement an earlier WTO ruling against its Continued Dumping and Subsidy Offset Act, upheld by the Appellate Body (WT/DS217/14, available at http://docsonline.wto.org). The ruling called for the repeal of the law, which provides US companies with anti-dumping fines collected from foreign exporters judged to be selling products at artificially low prices (see BRIDGES Weekly, 22 January 2003). The US Continued Dumping and Subsidy Offset Act of 2000, also known as the ‘Byrd Amendment,’ has resulted in hundreds of millions of dollars being handed over to US companies — notably steel, candles and pasta firms. The formal complainants to the case included the EU, Australia, Brazil, Chile, India, Indonesia, Japan, South Korea, Thailand, Canada and Mexico. According to them, the ‘Byrd Amendment’ punished exporters twice, first by fining them and secondly by giving these fines to US competitors. The US law, they contend, allows the money to be used for a wide range of purposes, including purchase of equipment, research, training, health care and pension benefits. According to the complainants, the act was inconsistent with the obligations of the US under several provisions of the GATT, the Anti-Dumping Agreement, and the Subsidies and Countervailing Measures Agreement (see BRIDGES Weekly, 17 July 2001).
The arbitration was triggered over a failure to agree on a "reasonable" period to repeal the law, the US claiming 15 months for implementation after the WTO’s adoption of the decision in January 2003 as opposed to the six months put forward by the complainants.
Small-Island state requests panel against the US
On 24 June 2003, Antigua and Barbuda made a first request for the establishment of a panel on US measures affecting the cross-border supply of gambling and betting services. The move came a fortnight after the US House of Representatives voted to ban credit-card payments to internet casinos, most of which are based overseas. The dispute marks the first time a measure concerning electronic commerce is brought to the WTO, and the second relating to the General Agreement on Trade in Services (GATS).
In the request for the establishment of a panel (WT/DS285/2), Antigua and Barbuda said that while US laws permitted operators of US origin to offer all types of gambling and betting services in the US (sometimes via exclusive rights or monopolistic structures), foreign operators were prohibited from supplying gambling and betting services from outside the US. This, claimed Antigua and Barbuda, constituted a violation of GATS obligations under provisions within Articles VI (Domestic Regulation), VIII (Monopolies and Exclusive Service Suppliers), XI (Payments and Transfers) XVI (Market Access) and XVII (National Treatment) and the US Schedule of Specific commitments. The US measures were hurting the island state’s internet gaming industry, a source of employment and government revenues.
According to Ronald Sanders, Antigua’s chief foreign affairs representative, Antigua had been trying to reduce its dependence on tourism, its main export earner, which was vulnerable to hurricanes. He added that Antigua deliberately aimed to attract electronic commerce, including internet gaming, in order to provide jobs for young people who might otherwise turn towards the flourishing drugs trade. The WTO Agreement does contain provisions designed to encourage developing countries to diversify away from "illicit narcotic crops" but only within the Agreement on Agriculture.
According to Washington, US law prohibits cross-border gambling because of the "social, psychological dangers and law enforcement problems that they create," and the "financial and social risks posed by such activities to its citizens, particularly but not exclusively children". The US denied that its prohibitions violate WTO rules on services, stressing that it had made no legal commitments on gaming under the GATS. While the US blocked Antigua’s first request for a WTO panel to rule on the dispute, WTO dispute settlement rules do not permit it to block a second request — expected next month.
Panel turns down India’s Appeal Against US Textiles Rules of Origin
In a first-of-its-kind victory for the US in a WTO textiles case, a WTO dispute settlement panel turned down a complaint by India against US Rules of Origin for import of cotton bed-sheets. India had claimed that the US unfairly differentiated between products, distorted trade and discriminated between countries. The US Rules of Origin — which determine how imported textiles and apparel are accounted for in filling quotas for individual countries — were upheld by a WTO panel. Issued on 20 June, the panel report found that India had failed to establish inconsistency of the US measures with the WTO Agreement on Rules of Origin (ROA).
India had contended that US Rules of Origin had the effect of restricting previously quota-free trade under the WTO Agreement on Textiles and Clothing (ATC). Under the "fabric forward rule" in the US, the country of origin, in the case of non-apparel textiles such as bed sheets, was assigned to the country where the greige fabric was woven. The majority of Indian exports are in greige fabric, which then undergoes processing in other countries before being exported to the US. An exception to the Rules of Origin was introduced in 2000 in the US for products such as silk, cotton, and man-made fibres in order to address EU concerns. Here, origin was assigned to the country where these fabrics were dyed, printed and subject to two or more finishing operations. These products were a major export item of the EU to the US.
India claimed, inter alia, that the US rules had shifted from those of its major trading partners, such as the EU and Canada, and did not advance the goals of harmonising international rules of origin as set out in the WTO ROA. The WTO ROA provides for assigning origin to the country where the "last substantial transformation" was carried out. US Rules of Origin were different from this provision. Further, by providing different treatment to products based on their fibre composition, the rules favoured products of export interest to the EU over products of export interest to developing countries.
The US argued that the WTO ROA does not prescribe the specific rules of origin Members must use, but provides guiding principles, including clarity, predictability, transparency, conciseness, completeness and neutrality of rules. According to the US, it met all these criteria. The US stated that the rules were based on the simple principle that the process resulting in the creation of a new textile product and therefore a change in the country of origin was "Assembly". The WTO ROA also did not prescribe that Members had to use the same rules to determine origin of different products. The US further contended that changes to Rules of Origin were not precluded by the ROA. The US rules that had been changed in order to settle an EU-US dispute applied to all WTO Members on a most favoured nation (MFN) basis and thus were non- discriminatory. The panel concluded that India had failed to establish that the US Rules of Origin as well as US Customs Regulations were inconsistent with specific provisions of Article 2 of the WTO ROA. One of the points raised by the Panel in response to the trade distorting effects created by the US measures, was India’s failure to establish a competitive relationship between individual goods of export interest to developing countries on the one hand and developing countries on the other (WT/DS243/R).
ICTSD reporting; "WTO Gives US Till Dec 27 To Repeal Unfair Price Fine Law," AP, 13 June 2003; "Arbitrator gives US until 27 December to implement ruling in ‘Byrd Amendment’ dispute," WTO PRESS RELEASE, 13 June 2003; "WTO Upholds US Textile Origin Rules In Dispute With India," DOW JONES, 20 June 2003; "Antigua and Barbuda requests panel against US on gambling and betting," WTO PRESS RELEASE, 26 June 2003; "The Americas & International Economy: Minnow bets on beating US at internet gambling," FINANCIAL TIMES, 25 June, 2003; "Online Gambling sparks trade war," BBC NEWS, 25 June 2003.